Belizean Bank to Pay $23 Million for its Role in Real Estate Development Scam

A Belize bank has agreed to pay $23 Million to the Federal Trade Commission (FTC) to settle allegations it provided assistance to a real estate scheme in Belize that defrauded U.S. consumers out of millions of dollars.

The settlement, filed in the United States District Court for the District of Maryland, resolves allegations that Belize’s Atlantic International Bank Limited (AIBL) abetted a real estate scam targeting American consumers with deceptive promises about a luxury “planned community approximately the size of Manhattan” it was building in Belize. The complaint charged AIBL with violating the FTC Act and the Telemarketing Sales Rule (TSR) by providing “substantial assistance or support” to the real estate scammers.

As stated in the complaint, defendant real estate developer Sanctuary Belize Enterprise (SBE), with AIBL’s assistance, lied to mostly American real estate investors about the substance and prospects of a housing community to be built in southern Belize. While making false promises that Sanctuary Belize would be a luxury community offering a high-return, low-risk investment, SBE took in more than $100 million in deposits from U.S. investors.

The developer made these inflated and false claims via telemarketers, television commercials on Fox News and Bloomberg News, and infomercials. But instead of building the community, SBE and the defendants syphoned U.S. investors’ money for their own personal use. Over a decade later, the project is unlikely to ever be completed, and U.S. consumers have lost the funds they invested in the project.

The FTC claimed the bank helped facilitate the scam by providing various marketing services such as coaching SBE and its telemarketers on the bank’s services that were available to investors interested in buying property at Sanctuary Belize. It also offered prospective investors lower interest rates and relaxed underwriting requirements in an effort to sell the community.

Crucially, AIBL encouraged SBE to sell to U.S. consumers, even as it knew or should have known that SBE was violating the law, according to the allegations.

The proposed consent order settling claims against AIBL was approved following several unsuccessful attempts by the bank to dismiss the case on the grounds that U.S. courts had no personal jurisdiction over it. The FTC rebuffed these motions by showing that the bank operated extensively in the U.S. through its joint efforts to market its banking services for the housing development to American customers.

A separate November 2018 order filed in the same court temporarily shut down the real estate scheme itself and froze its and its principals’ assets.

In addition to the financial penalties assessed on AIBL, the proposed order requires the bank—currently in liquidation—to cease all business activities other than those involved in the liquidation itself. The order prohibits anyone from operating the AIBL business following the liquidation as well.

The FTC has said it will use the proceeds from the judgment to provide redress to consumers affected by the scam.

Key Takeaways

The FTC has called this “the largest overseas real estate investment scam the FTC has ever targeted.” By pursuing AIBL for assisting SBE, and by effectively prohibiting AIBL, the bank’s liquidator, or any party from operating AIBL’s business, the FTC is sending a clear message to companies that provide assistance to scammers seeking to take advantage of U.S. investors overseas that the agency will deal harshly with any such attempts.

Washington AG Lawsuit Targets Local Area Robocall Marketing Scheme

The robocallers are at it again. This time targeting consumers in the state of Washington with millions of unwanted calls in an attempt to sell air-duct cleaning services, according to a recent lawsuit filed by Washington state Attorney General Bob Ferguson.

US Air Ducts & Sky Builders, DLM Services, and their principals Rami Mornel and David Moshe are accused of making more than 13 million robocalls to Washington consumers, sending millions of deceptive mailers, and engaging in a long list of deceptive marketing tactics—all of which duped consumers out of thousands of dollars.

The complaint charges defendants with violations of the state’s Consumer Protection Act and Automatic Dialing and Announcing Device Statute (WADAD) based on allegations of deceptive advertising and unfair sales tactics. The details of the allegations made by Attorney General Ferguson depict a scheme that went beyond robocalling to aggressively target and then deceive consumers using “smoke and mirrors” marketing—telling consumers one thing and then doing another.

First, defendants made the illegal robocalls in an attempt to sell their services, calling over 500 state residents over 100 times (each!). In order to evade detection in this campaign, the companies used illegal spoofing methods that displayed false caller ID numbers on call recipients’ phones.

In tandem, they sent mailers advertising services that made false promises of a “limited time offer” and reduced pricing. Additionally, the company posted fake Google reviews of the company online. Consumers who hired the cleaners were then subject to high pressure sales tactics to purchase a VIP service plan that carried more charges, which were initially represented as free.

Attorney General Ferguson filed the case against US Air Ducts after receiving multiple complaints from consumers. The Federal Trade Commission also received several hundred complaints against these defendants but has not pursued any action against them.

Attorney General Ferguson explained why his office pursued the case: “Robocalls are more than just annoying, they can also be illegal,” he stated. “These companies used illegal robocalls to bombard Washingtonians with deceptive marketing. My office will continue to be a watchdog to protect Washingtonians from illegal robocalls and deceptive marketing.”

The complaint seeks up to $2,000 per violation from defendants, as well as costs, fees, and restitution for affected consumers. In the meantime, the state has also obtained a temporary restraining order enjoining the companies from operating while the case proceeds.

Key Takeaways 

This action illustrates how the war on robocalls is being fought on both the federal and state levels. In cases such as these, state regulators can often move faster than their federal counterparts, especially when a fraudulent campaign is being conducted almost entirely from within the state.

California AG Sues Used Car Dealership Chain Over False Ads, Deceptive Practices 

California Attorney General Xavier Becerra recently filed a lawsuit against a local car dealership for engaging in false advertising practices and other unlawful business acts while targeting low income consumers.

Paul Blanco’s Good Car Company operates seven automobile dealerships across California, primarily selling used cars. The dealership sells most of its automobiles to low income families with subpar credit for whom “a vehicle is a necessity and can be the most expensive one-time purchase they ever make,” according to Attorney General Becerra.

The state accuses the dealership chain of running deceptive advertising campaigns online and on television and radio by promoting low interest rates and discount programs on which it did not deliver. The ads in question included promotions promising “preferential credit terms” which did not exist.

Instead, Attorney General Becerra contends, the company posted these advertisements to lure vulnerable consumers into the dealership where it then engaged in further deception.

When consumers purchased a car at the dealership, the company made false statements on third-party credit applications on their behalf. These unsuspecting consumers were then bound by loan terms they could not meet, according to the complaint.

Dealer staff were allegedly instructed to falsify applications during training sessions in which Paul Blanco directed his salespeople to lie to lenders. Additionally, Good Car Company made false statements to consumers that certain add-ons were required by law, which induced them to add additional services and products.

Seeking equitable relief, restitution, and damages against the car dealership and its principals, Attorney General Becerra explained why his office pursued the case:

“A car is one of the largest, and most important purchases for many families, allowing people to get to work, school, and connect to their communities. Far from a good car company, Paul Blanco’s abhorrent conduct put vulnerable families at risk, through deceitful advertising and illegal sales and lending practices. It’s disgraceful and it’s unlawful. Working families make every dollar count. Today’s action is about protecting our families from deception and unlawful practices that swindle these dollars away, leading to unaffordable debt.”

Key Takeaways

As with the state of Washington’s action against a local cleaning service, this case underscores the seriousness with which state level law enforcement will prosecute offensive conduct, especially when targeted to vulnerable populations.

CA AG Settles Charges Against Supplement Company for False Advertising and Selling Dangerous Products 

California Attorney General Xavier Becerra recently settled allegations against a company accused of selling nutritional supplements containing excessive amounts of lead, all while marketing the products as organic and healthy.

Newport Beach, California-based Amazing Grass, also doing business as Grass Advantage, markets its supplements to health-conscious consumers as organic “superfoods.” Attorney General Becerra charged the company with selling products containing excessive amounts of lead and cadmium, substances that even in low doses can cause severe health defects.

According to the AG’s complaint filed in California state court, Amazing Grass knowingly sold “organic food supplements, greens and protein powders” with seemingly healthy names like Amazing Meal Chocolate Infusion, Amazing Grass Green Superfood and Whole Food Nutrition Bar Café Mocha but which contained dangerous levels of lead.

Ironically, the company marketed the supplements for their ability to “remove metals from the body” even as the products contained excessive amounts of lead, according to the allegations. Furthermore, Amazing Grass failed to include warnings about lead levels as required by state law.

Attorney General Becerra’s announcement of the settlement with Amazing Grass detailed the health risks of consuming excessive amounts of lead, which can include “damage of the human nervous system,” “development harm” in pregnant women, and other chronic health problems.

“Lead and cadmium are highly toxic and can cause serious health problems, even at low levels,” stated the announcement. “Today’s settlement should send a strong message to anyone who would put profits ahead of public health. It doesn’t pay – the California Department of Justice will hold you accountable.”

The settlement requires Amazing Grass to cease the sale of certain of its products and pay over $200,000 to the state. It also requires the company to “take vigorous steps to reduce lead levels in the products it continues to sell,” including hiring a “food quality auditor” to recommend measures to reduce the lead in the supplements.

Key Takeaways

Federal agencies and nonprofit groups have targeted supplement companies accused of unscrupulous marketing tactics that tout their products as healthy when they are anything but. Contributing to the allegations of wrongdoing is the fact that many of these companies market their products to a specifically health-conscious audience via social media influencers and attractive websites.

Key here are the allegations that Amazing Grass specifically marketed its products for their ability to improve health and remove metals even as it knew that its products contained unhealthy levels of lead.

International Scammers Halted for Digital Advertising Fraud Scheme

Although a vast majority of scams target consumers, some have their sights on companies simply looking to gain eyeballs. In a recent case brimming with international intrigue, the operator of a digital advertising fraud scheme and a co-defendant pled guilty in a Brooklyn court to running an operation that defrauded companies out of $36 million.

Sergey Ovsyannikov, the mastermind behind the ad fraud scheme, pled guilty to two counts of wire fraud conspiracy and one count of aggravated identity theft over his role in two ad serving schemes. A co-defendant, Yevgeniy Timchenko, pled guilty to wire fraud and conspiracy to commit wire fraud.

Posing as a legitimate business selling digital ads, Ovsyannikov and seven other men primarily from the Russian Federation lied to customers about ads they claimed they posted online and then fabricated views and clicks. So rampant was the fraud that over 98 percent of the business was illegitimate, admitted Ovsyannikov, who said he and another defendant made tens of millions of dollars from the scheme.

In the first scheme, Ovsyannikov, Timchenko, and defendant Aleksandr Isaev operated a sham digital ad company called Adzos. This business loaded ads onto fake webpages using bots on computers infected with malware. In a second scheme, defendants operated an ad network that claimed to place “ad tags” or placeholders on websites on behalf of clients but, instead, loaded these ad tags onto fake websites and falsified user engagement, resulting in fraudulent charges for fake page views.

In his guilty plea, Ovsyannikov admitted to operating Adzos as well as another deceptive video advertising company with Timchenko and Isaev called Clickandia.

The wrongdoing in this case arose after cybersecurity company White Ops. released a report tracking an ad fraud company operating out of Russia, which was later confirmed by Google. Investigators tracked down the perpetrators by linking their IP addresses, leading to the arrest of three of the defendants via warrants executed in Malaysia, Bulgaria, and Estonia.

The remaining defendants have so far evaded detection. Following his plea, Ovsyannikov faces up to 26 ½ years in prison and a monetary judgment of over $14.6 million.

Admitting to his role in the scheme, Timchenko told U.S. Magistrate Judge Steven Gold that he “was involved in a scam to defraud companies in the online advertising industry.” He added that the fraudulent “network purported to deliver advertisements to real, human internet users. But instead of placing the ads in real websites, I entered into an agreement with another person at my company to create fake ad traffic.”

Key Takeaways

With ad serving technology evolving at breakneck pace, the ability of scam ad artists to ply their trade from any corner of the planet grows stronger every day. And as e-commerce sites and online publishers continue to hunger for new customers, the opportunities for scammers to exploit this demand seems endless.

So while ad fraud may never disappear, companies utilizing the services of these companies would be well advised to conduct thorough due diligence before hiring these companies or agencies buying ads on their behalf.